Joseph Perkins: Meltdown culprits go unpunished

Yes, the nation's housing sector is back. And nowhere more so than here in the Golden State.

Southern California just recorded its highest February home sales in six years, with median prices up 21 percent from a year earlier. Meanwhile, in January, the nine-county Bay Area in January had its strongest monthly home sales since 2007, with median prices rising 27 percent year over year.

The vast improvement of California's regional housing markets in 2012, and even stronger performance of those markets during the first two months of 2013, suggest that the state may just be on the precipice of a new housing boom.

Of course, the state's long-suffering home builders and realtors would welcome such a boom. But there are fears, understandably so, that another run up in home sales and prices will lead, almost inevitably, to similar – if not the same – double-dealing by banks and other financial institutions that created the housing bubble of the mid-2000s.

Its collapse cost the California economy nearly $1.5 trillion in lost home equity, housing-related jobs and housing-generated tax revenue. It precipitated the state's worst economic downturn since the Great Depression.

That the federal government spent a whopping $700 billion to bail out the banks and financial institutions responsible for the housing market collapse – and resultant meltdown of the nation's financial system – was outrageous.

That the crony capitalists who ran those banks and financial institutions have yet to be held responsible for their actions (or inactions) is downright scandalous. Indeed, contrast that with the government's prosecutorial zeal in the wake of the Savings and Loan crisis of two decades ago (which did nowhere near the damage of housing collapse and meltdown of the financial system). Some 1,852 S&L officials and executives faced either or both civil or criminal charges. Of those, some 1,072 actually were sent to prison.

That included such notorious figures as Charles Keating, who ran Lincoln Savings & Loan in Arizona. Lincoln's unscrupulous banking practices led to its failure in 1989, which cost the federal government $3 billion and left some 23,000 Lincoln customers with worthless bonds.

Keating was convicted of fraud, racketeering and conspiracy in both state and federal courts. The disgraced S&L executive spent four and a half years behind bars for his crimes.

There was as much hard evidence of fraud, racketeering, conspiracy and other crimes by banks and other financial institutions related to the housing market collapse and financial meltdown as there was by financial institutions during the S&L crisis.

Indeed, some 32 former employees of Ameriquest, then the nation's largest subprime lender, went on record stating that the company employed "boiler room" sales tactics, abusing its customers and breaking the law.

There was also Goldman Sachs, which sold certain of its unwitting clients a mortgage-backed security that another of its clients, relying on inside information, had bet was going to fail. And Bank of America, which was sued by the attorneys general of Arizona and Nevada for "misleading and deceiving" homeowners who tried to modify their mortgages, leading them to foreclosure.

An email between colleagues at S&P lamented that the market for mortgage backed securities was scary, but that S&P and the other credit rating agencies had created an "even bigger monster – CDOs."

The email continued: "Let's hope we are wealthy and retired by the time this house of cards falters."

Ameriquest, Goldman Sachs, B of A and S&P were hardly the only banks and financial institutions that gamed the housing market. The Federal Financial Crisis Inquiry Commission, created by Congress in 2009, headed by former California state treasurer Phil Angelides, said its investigation uncovered wrongdoing on the part of a number of banks and other financial institutions.

Angelides said the commission referred a number of cases to federal prosecutors. But, to date, those referrals have produced nowhere near the number of indictments and convictions that resulted from the S&L crisis.

The prospect of a new housing boom, and the danger that remains that banks and other financial institutions will once again engage in practices that could lead to a future market collapse, should prompt hearings on Capitol Hill.

Lawmakers should agree that never again will taxpayers bail out banks and financial institutions. And that senior executives of banks and financial institutions who plead guilty (or no contest) to fraud, racketeering, conspiracy (or other criminal wrongdoing) will face time behind bars.